Bill French

De Castro, Allan Paul B.

11196734

ManAcc

Bill French

The Bill French case generally discusses the Break even analysis in the problems that were given. Break even analysis is a very important tool to help any firm in deciding on the best operational volume. It requires three (3) types of costs namely the fixed cost (FC), variable cost (VC), and selling price (SP). As Bill French puts it, “the level of operation at which total costs that is, variable plus non-variable are just covered in the break even volume”. The break even volume is simply the least volume that a company should operate or produce in order to remain in business. There are several assumptions that were made in order to calculate the break even figures since there’s a lot of factors to be taken into account. The simplest of the computations is to be able to solve for the required fixed cost per unit contribution, one has to subtract the variable cost from the corresponding unit’s selling price. In the case, Bill French made some implicit assumptions to be able to determine the break even figures for his company. Most of these assumptions were brought up in the conversation he had with the participants of the meeting. In his calculations, he does not give room for the expected sales volume increase which according to Cooper, who was one of the participants from the production and manufacturing department, will increase sales by 20%. He further assumes that the plant capacity is only at 90% utilization implying that it is not fully utilized at present. However, we learned from Williams who is from the manufacturing department that the plant capacity may be indeed at 100% as he argues that in some sectors, there is no longer space for further expansion. He also assumed no changes in fixed cost for increased capacity being utilized. Furthermore, he assumed that total revenue and total expenses behave in a linear manner. Bill French’s analysis was evidently challenged during the meeting by...